Tag Archives: Trump

Now that the #TrumpTariffs are in place, we know that utility-scale solar will take a hit. GTM Research is expecting an 11 percent decrease in U.S. solar PV installations over the next five years — 7.6 GW reduction from pre-tariff expectations, 65 percent of which is in utility-scale.

But optimism remains in the residential market. Let’s start with just how much the tariff will increase the price of a residential solar installation. Based on the cost breakdown by component provided via SolarReviews (Fig 1. below), a 30 percent tariff would add $0.21 per watt or 6.8 percent to the retail cost of a solar system. But as Andrew Sendy, chairman of Solar Investments Inc., points out, this isn’t quite true. His analysis via Solar Estimate:

“The 70 cents average wholesale cost of solar panels in the United States is a blend of the cost of premium panels which can be around 90 cents per watt at the wholesale level [i.e Sunpower, Panasonic and LG] and the widely used Tier One Chinese solar panels such as Canadian Solar, Trina, ReneSola and Jinko, which have been sold during 2017 in larger volumes at the wholesale level for around 50 cents per watt,” Sendy writes. “If we look at the effect the new tariffs have on the cost of Tier One Chinese modules, selling for $0.50 per watt in 2017, then all things being equal the 30 percent tariff would add 15 cents per watt to the wholesale cost of panels themselves. This would equate to around 4.9 percent of the retail price of a solar system based on SolarReviews research.”

A 4.9 percent increase would increase the average residential cost of solar to $3.23 per watt and the cost of an average sized solar system of 6-kW by $900 to $19,380 before the solar tax credit or $13,566 after the tax credit.

Obviously this is some back-of-the-napkin calculating, but a useful exercise to show how minimal that bump in price could be for a residential system after factoring in:

The impact of more widely available financing mechanisms that provide more financial flexibility and payment terms (much more on this on page 24).

The further reduction of solar company margins and installation labor costs.

“With the solar tax credit in place nationally and net metering laws in place in around 30 states, many Americans simply do not know how good an investment installing solar panels on their home is,” Sendy continues. “As we come towards the end of the 30 percent solar tax credit in December 2019, I predict consumers will rush to get solar installed while this incentive and net metering are available. This will mean that solar companies will be able to spread the recovery of their fixed costs over more jobs. That means the fixed costs per job and per watt will fall.”

Conclusion (educated guess)

Overall, Sendy and Solar Estimate’s best guess is that the average falls in retail solar costs seen in recent years will be replaced by stable solar prices in 2018. His rationale:

The immediate impact of a 30 percent tariff will be reduced because of the large volumes of stock already shipped into the United States prior to the announcement of this tariff. In some cases, there is enough stock to meet almost six months of demand.

There undoubtedly will be rises in the wholesale price of modules, but these will be less than 30 percent as Chinese companies continue to lower costs.

What increases there are in cell prices and module prices at the wholesale level will be offset by increasing volumes for residential installers (ahead of the reduction in the solar tax credit at the end of 2019) that will lower the amount of fixed costs per job and per watt sold.

This lowering of fixed costs per job, solar company margins per job and installation costs through the greater use of internal electricians and roof laborers will at least compensate for the increase in wholesale module prices, meaning that despite the new tariffs, the retail cost of installed residential solar power systems will remain flat in 2018 at $3.08 per watt. This equates to $18,480 for an average-sized 6 kW system before the 30 percent solar tax credit, and $12,396 after the tax credit is claimed.

This will be the first year that solar panel installation costs haven’t fallen in the last decade, and it is a remarkable feat by the industry to be in a spot where it can adapt and possibly absorb such a big hit.

Today, the Solar Energy Industries Association (SEIA) sent its plan to the White House for boosting both U.S. manufacturing and the U.S. solar industry. As you might guess by the name, the America First Plan for Solar Energy, this is definitely the solar industry’s attempt to frame its message in a way that will most appeal to the Trump Administration.

The #1 message delivered in the America First Plan is to reject tariffs, with all other plans being secondary. SEIA lays out how, by just rejecting tariffs, Trump’s decision would grow jobs, support the military, ensure U.S. energy dominance and not provide a bail out to foreign companies. There are even quotes from Sean Hannity sprinkled in.

The politics at play in the pitch seem pretty obvious and likely necessary (Will Trump want a “save U.S. manufacturing” or a “protects national security” headline?) but it shouldn’t distract from the cogent recommendation the group sent to the ITC, which is the meat underneath the America First messaging. Those additional recommendations are listed in Step 6 of this plan:

SEIA recommends that President Trump create an import license fee system to imported crystalline silicon PV (CSPV) solar panels using Section 1102 of the Trade Act in combination with Section 201 of the 1974 law.

License revenues collected by the U.S. government are then distributed to the domestic industry to incentivize manufacturing growth. At a fee of a half cent per watt, this would raise roughly $192 million over three years for U.S. manufacturers. A 1¢ per watt fee would raise $384 million

This is money that would be taken from foreign manufacturers and delivered directly to American manufacturers.

It started with the Suniva bankruptcy earlier this month. Well, that’s not quite true because U.S.-based solar manufacturers have been crying foul regarding unfair competition from cell and module imports for awhile, but after filing for chapter 11, Suniva hit the button and filed a petition for global safeguards under Section 201-202 of the Trade Act of 1974 – the impact of which could reverberate far wider than just the solar industry.

But let’s stick with Suniva and solar for now.

Don’t we already have tariffs on imports?

Kind of. This module import influx was initially curtailed in 2013, when the U.S. Government, at the urging of SolarWorld (more on them later), instituted anti-dumping and countervailing duties against manufacturers in China and Taiwan. Since that time, according to GTM Research data, imports from China “have virtually disappeared in the past 2 years accounting for just 7% in the first two months of 2017” and Taiwan imports are all but gone. At the same time, U.S. manufacturing capacity has doubled.

However, market gaps were filled elsewhere. “Imports from Southeast Asia and Korea have skyrocketed, from 15% and 7% in Q1 2015 to 55% and 21% in Q4 2016 respectively,” GTM notes. As a result, despite the doubled capacity, U.S. share dropped below 15 percent overall while market prices fell drastically.

Suniva’s case

Suniva’s claim is U.S. solar manufacturers face serious injury from the ongoing and increasing influx of foreign imports, which continue to drive down domestic prices.

“The modern wave of solar technology was born from research in U.S. universities, industry and government, and U.S. manufacturers led the way in the commercialization of these technologies – and yet today, we stand fighting for the survival of jobs in an industry that the U.S. created,” said Matt Card, Suniva’s Executive Vice President of Commercial Operations. “Without today’s requested global safeguard, the U.S. solar manufacturing industry will die and we will not only lose solar manufacturing jobs today, but also those future jobs that will come from investing in the solar manufacturing industry of tomorrow.”

Suniva’s petition outlines these four requests:

1) An initial $0.40/W tariff on imported cells and a minimum price of $0.78/W for imported
Modules that incrementally steps down to $0.33/W on cells with a minimum price of $0.68/W on modules in four years.

2) “Equitable distribution” of AD/CVD duties based on production capacity as of March, which breaks down as:
• 25% distributed to U.S. c-Si cell manufacturers
• 25% distributed to U.S. c-Si module manufacturers
• 10% distributed to U.S. polysilicon, ingot and wafer manufacturers
• 20% to establish a fund, managed by U.S. Department of Commerce, for “re-initiation of manufacturing capacity idled between March 1, 2017 and date of imposition of safeguard measures.”

3) Creation of a “separate economic investment development program funded with any duties collected under a safeguard action” with the purpose of spurring new U.S. c-Si production capacity along the entire silicon to module supply chain.

4) Have the President initiate international trade negotiations to mitigate the underlying causes of increased imports to the U.S.

Implications

This Section 201 petition differs from the 2013 tariffs in significant ways that make a favorable ruling both more difficult to achieve but also (potentially) waaaaaay more impactful if achieved.

First off all, this thing will move quickly. The process starts with the International Trade Commission (ITC), which would decide on the “injury” within 120-150 days. A finding in favor of Suniva with recommended remedies could be sent to President Trump within 180 days. And then – that’s it. That’s the last step. It’s up to the Trump Administration, which hasn’t been shy about how it views global trade, to just accept, or even modify, the relief measures.

Um, uh oh?

There is no sense guessing how this plays out. Section 201 petitions are rare, and proving a “serious injury” to the ITC is a high standard.

But, let’s play out a potential scenario.

If a serious injury is found, the ITC could recommend a ton of remedies, including import tariffs, import volume limits, minimum prices and so on – and they could be aimed at any and all countries. And again, with such a decision then sent to President Trump as the final decider of implementation, this could just be the first domino in a series of politically driven trade petitions.

It is a cut off your nose to spite your face scenario. The unintended, wide-ranging, long-term consequences of such a move is enough that even SolarWorld showed hesitation in its statement on the petition filing. (bolded here for emphasis):

“The case of Suniva dramatically demonstrates that the U.S. solar manufacturing industry still suffers from unfair trade. In particular, highly subsidized Chinese companies as well as other producers are globally dumping their products, forcing competitors to take losses, lay off workers and exit the market. SolarWorld has fought decisively against this kind of unfair competition for many years. China now has managed to circumvent and violate existing trade defense measures in several ways and again incited a ruinous price race to the bottom, destroying U.S. manufacturing jobs. SolarWorld – as the largest U.S. crystalline-silicon solar manufacturer, with more than 40 years of U.S. manufacturing experience – will assess the case brought by Suniva but prefers that any action to be taken against unfair trade shall consider all parts of the U.S. solar value chain.We’re committed to helping to find a way that also considers the interests of other parties playing fair in the U.S. solar market.”

Much of our musings about whether a Donald Trump presidency would be good or bad for the solar industry fell back on the “he’s a business man, so maybe he will see the positive business case and job creation story to be told shifting to solar technology.” Well, today, the Trump Administration, fresh off its health care failure, makes its first moves to roll back a lot of carbon emissions reduction initiatives started under Obama’s Clean Power Plan.

Bottom line for the solar industry? With anything outside of the ITC, not much immediate impact is expected, and reports are that the orders don’t go as far as some conservatives would like. Local policy will still be the much bigger decider of success for your solar business. Anyway, here’s what is being done and what’s not being done in the reported executive actions.

Energy policies being changed

A fossil fuel comeback is definitely the main objective. Rules written under the Obama Administration that made it basically impossible to build a coal-fired power plant will be rewritten. The moratorium on new coal mines on federal lands will be lifted.

Directives to reduce the federal government’s own carbon footprint will be rolled back.

Any policies that are seen as a restriction on things like fracking and offshore drilling will likely be removed.

The president also will tell federal regulators to stop using the “social cost of carbon,” which attempts to quantify the effects of climate change, in economic analyses of future rules.

What’s staying the same

There is no order to withdraw from the Paris climate deal.

The EPA’s policy under the 2009 endangerment finding is not being rewritten.

On the campaign trail, Donald Trump made it clear that he favored coal and natural gas, wanted to kill energy regulations, and that he thought wind and solar power were too expensive. In fact, at a May 2016 press conference Trump said, “I know a lot about solar, the problem with solar is it’s very expensive.”

However, Trump’s talk about coal and natural gas, and wind and solar expense (which isn’t true, by the way) may not lead to the end of renewable energy in the United States. In fact, solar likely will continue to flourish under the new administration because the industry creates jobs, prices are dropping, and it has consistently had support from both sides of the political aisle.

1. Jobs, jobs, jobs

The No. 1 reason President Trump won’t kill the solar industry: jobs. In 2015, the solar energy industry employed 209,000 people in the U.S. And its job-creation rate was 12 times higher than employment growth in the overall economy, according to the Solar Foundation’s 2015 National Solar Jobs Census. Plus, the number of jobs in the industry keeps increasing—it had a 20 percent growth rate in 2015. The solar industry is a job-creation machine.

Trump has said growing the economy is key in “Making America Great Again.” Those 209,000 people are just a portion of the number of people working in the renewable energy industry—more than 600,000 people work in industries related to alternative energy, according to fivethirtyeight.com. “If Trump really wants to bring jobs back, the most reliable way to bring jobs to rural America is clean energy,” said solar entrepreneur Jigar Shah, co-founder of San Francisco-based finance company Generate Capital, in a Take Part interview. Job growth is a vital component of a growing economy.

2. Money, money, money

On the campaign trail, Trump told supporters that solar was too expensive. But that really isn’t the case anymore.

According to a Bloomberg article earlier this year, “the cost of solar power has fallen to 1/150th of its level in the 1970s, while the total amount of installed solar has soared 115,000-fold.” The reason solar will continue to increase its foothold on the market, according to Bloomberg, is that it’s a technology not a fuel. Solar efficiencies will continue to increase and prices will keep falling. The same goes for batteries to store all that solar power.

Solar power will only get less expensive and, as a businessman, Trump should easily recognize the value in an efficient and economic energy source.

3. Support across party lines

Decades ago, only hippies were interested in generating their own power. That’s not the case anymore. A Pew survey released in October 2016 showed that 89 percent of Americans—from both political parties—supported more solar panel farms in the U.S. The survey also showed that renewable energy is an issue most Americans can agree on: “While there are substantial party and ideological divides over increasing fossil fuel and nuclear energy sources, strong majorities of all political groups support more solar and wind production.”

Bipartisan support isn’t happening only among regular voters. Elected officials are behind solar too. The Federal Investment Tax Credit, which gives a 30 percent tax credit to people and commercial solar owners against the cost of the solar project, was recently renewed. It was extended by a Republican-controlled Congress in 2015. In addition, states, counties, cities, and towns all over the country have policies encouraging solar power. If Trump tried to kill the tax credits, he’d stand against the popularity of solar and support on both sides of the aisle, Gurcan Gulen, a senior energy economist at the University of Texas, told fivethirtyeight.com.

President-elect Trump’s campaign rhetoric about energy likely won’t mean death to renewable alternatives. Solar power is an industry that creates jobs, with falling prices and bipartisan support. So don’t worry, solar power is here to stay.